A descriptive cross-sectional, retrospective cost analysis was conducted in a public and private hospitals in Arua district, Uganda with the aim of assessing the resource use, costs, and financing of those hospitals. It employed the "full costing" approach to hospital costing. The results showed that most of the government recurrent expenditure on health facilities in the district went to the public hospital, while most of the revenues at the private hospital was from donations. The distribution of costs by category of inputs showed that materials and supplies costs were highest in both hospital, followed by employee costs. The administration, pharmacy and store had the highest cost at both hospitals. The cost of the kitchen was very high in the public hospital. The ratio of the unit costs of an out patient visit to an inpatient day and to the unit cost per case treated was 1:1:6 in the private and 1:7:46 in the public. This indicates the relative low cost of public hospital outpatient service and the relative high cost of the outpatient in the private hospital. The employee costs and the drug costs were the most important components of the unit costs in the OPD at both hospitals while in the inpatient wards, besides the above mentioned components, there were also the kitchen, blood bank (public) and theatre in both hospitals. It is concluded that hospitals should look for ways of increasing the level of recurrent funding available to them by increasing the efficiency of their operations and by mobilising additional resources from other sources other than government.